The present invention relates to the facilitation of logistics over the Internet. More specifically, the present invention provides an online electronic marketplace in which carriers bid for freight tendered by shippers and shippers purchase the most attractive transportation services for their loads.
In 1998, U.S. businesses spent $898 billion in supply chain expenditures. Transportation expenditures accounted for 47%, or $425 billion of the supply chain costs. Globally, total costs related to supply chain logistics are estimated to be approximately $3.4 trillion. From the perspective of the consumer, supply chain logistics costs account for 5% to 50% of the total costs of a delivered product.
Transportation in the United States today is highly fragmented, with no single transportation company having any significant portion of the $425 billion market. The top 10 carriers by revenue in 1998 accounted for a combined market share of 14.5%, and the top 100 carriers had a combined market share of 22%.
The breakdown of the $425 billion transportation market by type of carrier is, approximately, $249 billion for private fleets (59% market, share), $124 billion for-hire trucking (29% market share), and $52 billion for-hire package express services (12% market share).
For all of these market sectors, empty, non-revenue-generating miles are a significant issue. Based on statistics tracked by the American Trucking Association, for-hire carriers averaged 12.6% empty miles for the first seven months of 1999. Small truckload carriers with less than $30 million in annual revenue incurred the highest percentage empty miles averaging 18.4%. Large less-than-truckload (LTL) carriers fared the best with 6.5% empty miles for the same period. Statistics on private fleets' percentage of empty miles according to the Private Fleet Benchmark of Quality and Productivity are averaging 24%. Based on these numbers, the projected inefficiency in U.S. transportation expenditures today as a result of empty non-revenue generating miles is approximately $82 billion dollars annually.
Transportation brokers play a significant role in the truckload transportation market today, representing additional inefficiency in the supply chain. The demand for their services is due to the fragmentation of information in the industry and the associated empty miles. Transportation brokers have relationships with shippers in regional markets, as well as carriers who move equipment into and out of those regions. Brokers serve as the middlemen between shippers and carriers in matching loads and equipment in return for a typical commission of 8-10% of the cost of the load, normally charging a $50-$100 minimum. Most shippers and carriers have little alternative to paying this cost of doing business due to their limited visibility into the marketplace.
It is therefore desirable to provide a means by which shippers' loads may be connected with carrier capacity in a way which helps to eliminate the supply chain inefficiencies described above.